Investors hunting for “a deal” and think they found one in Hertz Global Holdings (OCTMKTS:HTZGQ) should keep looking. Hertz stock, though cheap, is a loser.
Let me put this in a way that fits this time. Hertz stock lost the popular vote and the Electoral College. In fact, it shouldn’t be on any ballots.
This is a company that was not prepared for a major test, much less the economic damage caused by the novel coronavirus. So, the car rental company’s executives steered into bankruptcy.
Investors should take the hint to walk away from Hertz stock and never look back.
Hertz Stock Has a Long Heritage
The Hertz company of today can trace its heritage more than 100 years ago. As we see all too often, today’s leaders weren’t up to the task compared to corporate pioneers.
Walter Jacobs began a rental business in 1918 in Chicago with 12 Model T cars. About five years later, John Hertz acquired and renamed the company, which by then ran a fleet of about 600 vehicles. Although he sold his company, Jacobs stayed on as president and COO until 1961. Jacobs continued his leadership as a member of the board until 1968.
Three years after he bought it, Hertz sold the company to General Motors (NYSE:GM). The firm continued to thrive under GM’s umbrella. It opened the first rental office at an airport, offered one-way rentals and expanded the company to Canada and Europe.
The company went public in 1954 under the ticker HTZ. The company changed hands several times in the following years and was owned for a time by a subsidiary of Ford Motor Co. (NYSE:F) before it was sold and taken private until 2006, when it returned to the New York Stock Exchange.
Covid-19 Upends Hertz Operations
The pandemic began reverberating through the U.S. economy early in 2020. Travelers stayed home and Hertz was not in a position to withstand the shocks to the travel industry.
Now based in Florida, the company announced on April 30 that it missed lease payments on its fleet and was negotiating with creditors to stay afloat. Those talks failed. The company filed for Chapter 11 bankruptcy on May 22, and Hertz stock dropped to 59 cents per share.
Amazingly, retail investors continued to trade Hertz stock and the volume has been noteworthy.
In the last year, share prices ranged from 40 cents to $20.85. Since June, it has mostly traded between $1 and $2. The NYSE delisted Hertz stock in October. It currently trades over-the-counter with the ticker HTZGQ.
Some observers joke that Hertz stock has become a zombie.
Storm Clouds Building Over Investors
As 2020 draws to a close, investors may be wondering if this nearly worthless penny stock has the potential to come back to life. Sorry to say that is very doubtful.
Several of my InvestorPlace colleagues see a bleak future for Hertz investors.
Ian Bezek warns that Hertz stock will be worthless after the company finishes the bankruptcy process. In his recent article, he cites the bankruptcy experience of GM: “[T]he company may still exist in the future but people owning current Hertz stock won’t own anything.”
And Lou Carlozo points out that leaving investors with worthless stock carries a price.
“Some things money can’t buy, let alone rent, and in the case of Hertz stock, investor confidence in any form might be a thing of the past,” he writes.
Hopefully, investors looking to add to their nest egg got rid of their Hertz stock before now. It’s time for even the most hopeful optimist to close the door on this one. Hertz is not a company for serious investors to even half-way consider buying.
I suggest you listen to what the market is saying. Hertz stock is on a dead-end road.
On the date of publication, Larry Sullivan did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Larry Sullivan is a veteran journalist in Florida who has covered banking and finance for several years. He is a former investing editor at U.S. News & World Report in Washington D.C.